Getting Pre-Approved Should Always Be Your First Step

In many markets across the country, the number of buyers searching for their dream homes greatly outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.

Even if you are in a market that is not as competitive, understanding your budget will give you the confidence of knowing if your dream home is within your reach.

Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”

Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:

  1. Capacity: Your current and future ability to make your payments
  2. Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
  3. Collateral: The home, or type of home, that you would like to purchase
  4. Credit: Your history of paying bills and other debts on time

Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.

Bottom Line

Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so.

 

Posted by The KCM Crew

Are you ready to get pre-approved? Visit our website to get started!

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The Mortgage Process: What You Need to Know [INFOGRAPHIC]

Some Highlights:

  • Many buyers are purchasing a home with a down payment as little as 3%.
  • You may already qualify for a loan, even if you don’t have perfect credit.
  • Take advantage of the knowledge of your local professionals who are there to help you determine how much you can afford.

 

Posted by The KCM Crew

Visit our website to get started on finding your next home!

What is the Cost of Waiting Until Next Year to Buy?

We recently shared that over the course of the last 12 months, home prices have appreciated by 7.0%. Over the same amount of time, interest rates have remained historically low which has allowed many buyers to enter the market.

As a seller, you will likely be most concerned about ‘short-term price’ – where home values are headed over the next six months. As a buyer, however, you must not be concerned about price, but instead about the ‘long-term cost’ of the home.

The Mortgage Bankers Association (MBA), Freddie Mac, and Fannie Mae all project that mortgage interest rates will increase by this time next year. According to CoreLogic’s most recent Home Price Index Report, home prices will appreciate by 4.7% over the next 12 months.

What Does This Mean as a Buyer?

If home prices appreciate by 4.7% over the next twelve months as predicted by CoreLogic, here is a simple demonstration of the impact that an increase in interest rate would have on the mortgage payment of a home selling for approximately $250,000 today:

Bottom Line

If buying a home is in your plan for 2018, doing it sooner rather than later could save you thousands of dollars over the terms of your loan.

 

Posted by The KCM Crew

Home Prices Up 7% from Last Year

According to CoreLogic’s latest Home Price Indexnational home prices have appreciated by 7.0% from October 2016 to October 2017. This marks the second month in a row with a 7.0% year-over-year increase.

A lack of supply of homes for sale has led to upward pressure on home prices across the country, especially in areas where both existing and new home inventory have not kept up with buyer demand.

CoreLogic’s Chief Economist Frank Nothaft elaborated on the significance of such a large year-over-year gain, 

“Single-family residential sales and prices continued to heat up in October. On a year-over-year basis, home prices grew in excess of 6 percent for four consecutive months ending in October, the longest such streak since June 2014.

This escalation in home prices reflects both the acute lack of supply and the strengthening economy.”

This is great news for homeowners who have gained over $13,000 in equity in their home over the last year! Those homeowners who had been on the fence as to whether or not to sell will be pleasantly surprised to find out that they now have an even larger profit to help cover a down payment on their dream home.

CoreLogic’s President & CEO Frank Martell had this to say,

“The acceleration in home prices is good news for both homeowners and the economy because it leads to higher home equity balances that support consumer spending and is a cushion against mortgage risk. However, for entry-level renters and first-time homebuyers, it leads to tougher affordability challenges.”

Any time the price of a home goes up there will likely be concern about the affordability of that home, but there is good news. Mortgage interest rates remain at historic lows, allowing buyers to enter the housing market and lock in a low monthly housing cost.

Rents Are Also Rising

The report went on to mention that over the same 12-month period, median rental prices for a single-family home have also risen by 4.2%.

With rents and home prices rising at the same time, first-time buyers may find the task of saving for a down payment a little daunting. Low down payment programs are available and have been a very popular option for first-time buyers. The median down payment for first-time buyers in 2017 was only 5%! 

Bottom Line

If you are looking to enter the housing market, as either a buyer or a seller, let’s get together to go over exactly what’s going on in our neighborhood and discuss your options!

 

Posted by The KCM Crew

Buying in 2018? 7 Steps to Take Now

With some careful prep work in the next few months, your family could be in a new home by summer.

Now is the time to get things in order for a home search next year.

If you’re thinking about buying a home in 2018, November and December are the perfect time to “warm up” for the house hunt so you can hit the ground running in the new year. And whether you’re looking in Athens, GA, or Athens, NY, the prep work is relatively the same.

We’ve asked real estate and mortgage professionals to chime in about what prospective homebuyers should do to ready themselves for buying a home. From organizing your finances to save money to finding a real estate agent and mortgage lender, there is plenty to keep you busy!

7 Steps to Be Ready to Buy a House in 2018

  1. 1. Check your credit score.

    A credit score is a numerical representation of your credit report. FICO scores range from 300 to 850, and the higher your score, the better. “Good credit is like gold when obtaining a mortgage,” says Denise Supplee, a Pennsylvania agent. Typically, you’ll get the best interest rate on a loan if your score is 740 and above. “A higher credit score should net you a lower mortgage rate,” says Lee Gimpel, co-creator of The Good Credit Game, which specializes in financial education. “That lower rate, even if it’s only 1 or 2 percent lower, can mean saving thousands of dollars per year.” If your credit score falls short, get busy repairing it. Correct any errors that might be on your report, start paying all your bills on time, and get your credit limit raised. Note, though, that you shouldn’t max out your card each month. It’s best to use 30 percent or less of your total available credit.

  2. 2. Don’t open new credit cards.

    If you think resisting taking a selfie when you’re face-to-face with your fave celebrity is a testament to your willpower, that’s sissy stuff compared with turning down every offer to open a credit card, even if you could save 20 percent (or more!) on your holiday purchases. Tempting as saving at checkout can be, opening new credit may hurt your chances of getting a mortgage, or at least of getting the best rate on a loan.

    “By opening the account, you have created another line of credit,” says Paul Anastos, president of Mortgage Master, a division of loanDepot, a nonbank lender. “That credit line, and what is borrowed, can change the application numbers and jeopardize the application.” What could save you a few dollars now could cost you far more in the long run if your mortgage payments will be higher. And along those same lines, “Don’t overspend during the holiday season,” says Dean Sioukas founder of Magilla Loans, an online lending exchange. “Especially on impulse purchases that can be tempting during the holidays.”

  3. 3. Suggest financial gifts for the holidays.

    Besides the mortgage loan, you’ll need a sizable amount of cash to buy a house. There’s the down payment to consider, closing costs, and moving costs. You should also set aside money for unexpected repairs and costs, says Brian Betzler, regional sales manager at TD Bank. Not being prepared “is probably why nearly half of millennials incurred up to $5,000 in unexpected costs during the mortgage process, according to a TD survey,” he says.

    A potential solution? Bulk up that emergency fund. “Instead of getting gifts for the holidays, [prospective homebuyers] can suggest cash instead that will be put toward their home,” says Paul Sian, a Kentucky and Ohio agent. And remember, you might be getting some money back after you file your tax return. Don’t blow it on vacation. “A tax refund is a great way to add to your cash reserves for a down payment,” says David Hosterman, branch manager of Castle & Cooke Mortgage in Colorado.

  4. 4. Interview potential real estate agents.

    If your neighbor, relative, or friend of a friend happens to know (or is) a real estate agent, that’s great. This person might be the perfect agent for you. But you owe it to yourself to shop around. “Look for [an agent] who is knowledgeable, good, integral, and can assist you in reaching the goal of homeownership,” says Chantay Bridges, a Los Angeles, CA, real estate agent. “Make sure they are not a novice, new, or just unaware of how to do a specific transaction.” The end of the year is usually a slow time for agents, so chances are they’ll be more accommodating to making an appointment on your schedule.

  5. 5. Keep tabs on interest rates.

    If you hear that interest rates are at historic lows or that interest rates are on the rise, you should not assume that you can get the rock-bottom rate. Not everyone gets the same interest rate on a mortgage loan. It depends on your financial picture and on the lender you choose. “Everyone knows that home prices are, at least to some extent, negotiable, but we find loans to be the same,” says Warren Ward, CFP with WWA Planning & Investments in Indiana. He advises that homebuyers shop around for the lowest interest rates. Note that closing costs can vary too, so discuss with your real estate agent ways to keep yours down. “We saved $150 on the closing fees by selecting the cheapest title company,” says Ward. “I guess that’s not much, but I think most people would bend over to pick up three $50 bills if they were lying on the sidewalk.”

  6. 6. Find a mortgage lender.

    Before you even start looking for a home (and yes, we even mean browsing online listings), look for a mortgage lender to find out if you can afford to buy a home. If you can’t right now, there’s no use torturing yourself by finding your dream home that’s just out of reach. But how do you find a lender? “If you have a bank you’ve been with for years, ask them,” says Bridges. “Your [real estate agent] can also refer a good lender to you. Compare [that lender] with two others. Look at what they offer, costs, points, and how long to close.” Once you know how much home you can afford, perform your home search based on your preapproval amount or less.

  7. 7. Get preapproved.

    When a lender gives your financials the once-over and preapproves you for a mortgage, you’ll be able to show sellers that you really can buy their house. But how do you get preapproved? By preparing a few documents, which you can do several months in advance of the actual purchase. Here’s what you need to buy a house.

    • Tax returns for the past two years
    • W-2 forms for the past two years
    • Paycheck stubs from the past few months
    • Proof of mortgage or rent payments for the past year
    • A list of all your debts, including credit cards, student loans, auto loans, and alimony
    • A list of all your assets, including bank statements, auto titles, real estate, and any investment accounts

    Paul Anastos also advises not to change jobs, make big purchases, or miss any debt payments as you prepare to get a mortgage.

    Originally published October 17, 2016. Updated October 30, 2017. 

    Published by Laura Agadoni on Trulia

5 Reasons Homeownership Makes ‘Cents’

The American Dream of homeownership is alive and well. Recent reports show that the US homeownership rate has rebounded from recent lows and is headed in the right direction. The personal reasons to own differ for each buyer, but there are many basic similarities.

Today we want to talk about the top 5 financial reasons you should own your own home.

  1. Homeownership is a form of forced savings – Paying your mortgage each month allows you to build equity in your home that you can tap into later in life for renovations, to pay off high-interest credit card debt, or even send a child to college. As a renter, you guarantee that your landlord is the person with that equity.
  2. Homeownership provides tax savings – One way to save on taxes is to own your own home. You may be able to deduct your mortgage interest, property taxes, and profits from selling your home, but make sure to always check with your accountant first to find out which tax advantages apply to you in your area.
  3. Homeownership allows you to lock in your monthly housing cost – When you purchase your home with a fixed-rate mortgage, you lock in your monthly housing cost for the next 5, 15, or 30 years. Interest rates have remained around 4% all year, marking some of the lowest rates in history. The value of your home will continue to rise with inflation, but your monthly costs will not.
  4. Buying a home is cheaper than renting – According to the latest report from Trulia, it is now 37.4% less expensive to buy a home of your own than to rent in the US. That number varies throughout the country but ranges from 6% cheaper in San Jose, CA to 57% cheaper in Detroit, MI.
  5. No other investment lets you live inside of it – You can choose to invest your money in gold or the stock market, but you will still need somewhere to live. In a home that you own, you can wake up every morning knowing that your investment is gaining value while providing you a safe place to live.

Bottom Line

Before you sign another lease, let’s get together to help you better understand all your options.

 

Posted by The KCM Crew

Why You Should Still Talk to a Lender Even If You’re Not Ready to Buy a Home

BrianAJackson/iStock

If you’re a first-time home buyer, you might think you’re not ready to purchase a house. Perhaps you’re concerned about your job situation, your previous credit history, or your high monthly expenses. Whatever the circumstances, every borrower and financial situation is unique.

Unless you’re a financial expert, it’s best not to self-diagnose your financial problems. You wouldn’t skip out on the dentist to fill your own cavities, so don’t try to solve your financial troubles yourself either. A loan officer can walk you through your options—and they won’t try to drill your teeth!

When you apply for home loans, mortgage loan officers look at your credit score, credit history, monthly liabilities, income, and assets. These officers see the entire financial picture, not just the investable funds. A reputable loan officer with experience can get you on the right track for buying a home.

Here are three common reasons people don’t want to apply for a mortgage and what you should do if you’re really serious about buying a home.

A less-than-ideal credit report

The reality is that mortgage companies are required to pull a copy of your credit report, which includes scores from all three credit reporting bureaus. Your credit report is the most accurate representation of your credit available. Don’t let your messy credit report keep you from talking to a lender. After looking at your credit report, the lender can actually tell you what debts are the biggest drain on your borrowing power so you can start making smart financial decisions to improve your score.

Not enough income

Let the mortgage company review your pay stubs, W-2s, and tax returns for the last two years. If you were self-employed, let the loan officer look at your tax returns and evaluate your credit to determine what down payment you can afford and what you can buy. The lender can give you an idea of what you need to do to qualify, including how much more money you need to make to offset a proposed mortgage payment. With an action plan and a strategy in place, it may just take you a matter of months to button up your financial picture to qualify.

Too much debt

Debt and liabilities definitely impact spending power. Every dollar of debt you have requires two dollars of income to offset it. So for example, if you have a car loan that’s $500 a month, you will need $1,000 a month of income to offset that monthly liability. If more than 15% of your income currently goes toward consumer debt, you’ll have to either pay off debt or get more income—perhaps via a cosigner—to qualify for mortgage financing. Again, let the lender look at your financial picture so they can tell you what it takes to make it work.

If you’re planning to buy a house in the future but aren’t financially ready, talk to a professional. Meet with them face-to-face, provide them with all of your financial documentation, let them run a copy of your credit report, and go through a pre-home buying consultation so they can either pre-approve you or tell you what to do to become pre-approved in the future.

Many times, potential buyers are not ready, but having a conversation with a professional—so you know where you stand and where you are going—can be tremendously beneficial. You can also take a look at your financial health with a free credit report from Credit.com.

 

Posted on realtor.com

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